Daily Brief Health Care: China Traditional Chinese Medicine, Otsuka Holdings, Recce Ltd and more

• Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
• CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
• There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.

• Otsuka Holdings (4578 JP) ended 2023 on a mixed note. Both revenue and business profit were ahead of guidance. However, operating and net profits missed guidance, dragged by impairment loss.
• Four global pharmaceutical products as well as the nutraceuticals business led the business performance. Even after excluding the impact of foreign exchange, the business remained above plan.
• The company has guided for 6% YoY growth in 2024 revenue and business profit to ¥2,140B and ¥330B, respectively. 2024 net profit is expected to jump 106% YoY to ¥250B.

Recce Pharmaceuticals has announced several positive developments in recent weeks relating to its therapeutic programmes, particularly for lead anti-infective candidate RECCE® 327 (R327). It entered a strategic collaboration with an Indonesian biomedical company, PT Etana Biotechnologies (Etana), which may support the engagement of relatively lower-cost clinical trial sites with potentially deep patient pools in South-East Asia (SEA). The company also recently disclosed positive efficacy results among five patients treated in its Phase I/II study of topical R327 in patients with diabetic foot infections (DFI), and it now plans to expand this programme to additional domestic and global sites. We have raised our valuation to reflect the rolling forward of our estimates and reductions in our R&D and SG&A cost projections, following the most recent quarterly cash flow update. We now obtain a risk-adjusted net present value (rNPV) of A$652.6m (or A$3.20/share), versus A$551.1m previously.